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The Ted Baker founder Ray Kelvin’s 35% shareholding in the fashion retailer is expected to be diluted after he backed an emergency £105m fundraising to get the business through the coronavirus pandemic.
The retailer said it would raise £95m through a share placing, plus up to £10m through an offer for subscription.
The coronavirus pandemic has caused revenues to slump by 36% between 26 January 2020 to 2 May 2020, with department stores and branches closed by a government order.
Kelvin left the company in March 2019 after allegations of inappropriate behaviour, including “forced hugs”, emerged in the previous December. He denied all allegations of misconduct.
It is thought that Kelvin is unlikely to maintain his 35% stake at its current size, although he is expected to take part in the fundraising, according to a person with knowledge of the discussions.
The emergency fundraising comes after a difficult year for the retailer. In delayed results, Ted Baker reported a loss before tax of £79.9m in the year to 25 January, before the pandemic started to affect sales, and a 1.4% fall in revenues.
The company blamed its struggles in part on the departure of Kelvin, which triggered a round of disruption in the company’s leadership. Amid a tough retail environment, Ted Baker announced a string of profit warnings over the course of the year, as well as an audit error in which it overestimated the value of clothes in its warehouses. Ted Baker on Monday appointed BDO as its new auditor, replacing KPMG after the scandal.
Ted Baker’s management on Monday launched a plan to try to return it to profit. The plan will include broadening the brand’s offering to make its clothing “more relevant to all day/week occasions” and to sell more accessories and shoes.
The company will also invest more in online sales, which have offered a bright spot during the lockdown. Online sales have risen by 78% year on year since 22 March, the day before the UK lockdown began.
A “significant cost reduction” will aim to generate £30m in free cash flow by 2023. Consultants Alix Partners will carry out an operational review with the aim of cutting £5m in costs in the next year, with some jobs expected to be lost.
In March the retailer also completed the sale and leaseback of its London headquarters, the Ugly Brown Building, raising £72m to pay back lenders.
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